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Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 by the Pacific Exchange, Inc. Relating to Membership, Options Floor and Market Maker Fees

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Start Preamble July 18, 2001.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 thereunder,[2] notice is hereby given that on May 31, 2001, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. On July 12, 2001, the Exchange filed Amendment No. 1 to the proposal.[3] The Commission Start Printed Page 38775is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The PCX is proposing to modify its Schedule of Fees and Charges for Market Maker Handheld Tethering Network Fees, Registered Representative Fees, and certain other fees designed to recover costs on leased space, phone maintenance and options orientation and test fees.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the PCX included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The PCX has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

The Exchange is proposing to make the following changes to its Schedule of Fees and Charges:

General Member Fees

(1) Options Orientation and Test Fee:

The PCX incurs certain expenses in connection with administering orientations and test for new members. According to the Exchange, these costs, which are incurred as part of the investigation, orientation and testing process, are currently recovered via an options study package and test fee, an investigation fee and a fingerprinting fee. In order to consolidate these fees and cover additional cost of improving the orientation program, the Exchange proposes to increase the orientation and test fee from $200 to $1,000 and to eliminate the $100 investigation fee and the $30 and $10 fingerprinting fees. The fee increase is based on the costs incurred in providing an updated and more comprehensive curriculum. The additional costs include production, development, proctor fees and staff charges. The consolidated fee also recovers the revenues that were previously collected through the fingerprinting and investigation charges.

(2) Regulatory Fees

(i) Registered Representative Fee

The Exchange currently charges an annual fee of $35 to all Register Representatives and Registered Option Principals for maintenance, new application, or transfer of registration status. This fee supports the costs related to regulatory oversight and enforcement. To better align PCX's fees with the actual costs of delivering these services, the Exchange proposes to increase the Registered Representative fee from $35 to $45 per year.

Options Floor Fees

(1) Marker Maker Hand Held Tethering Fee

Currently, Market Makers use portable hand held terminals for trade entry, position tracking, stock layoff and other services. To upgrade this system, the Exchange is installing a hardwired network. The Exchange proposes to impose a $500 one time signup fee per handheld and a $100 fee per registered user per month. These fees reflect the Exchange's costs of purchasing the hardware and installing the network.

(2) Vendor Equipment Room Usage Fee

The Vendor Equipment Room (“VER”) houses servers used to transmit market data and support trading systems. The PCX represents that currently the VER costs are not passed on to the member firms that use the facility. The VER overhead costs include rent, utilities, and insurance and the costs of developing the facility. In order to cover the costs of providing the facility, the Exchange proposes to impose on cabinet users a $2,150 fee per cabinet per month.[4]

(3) Telecom Move/Add/Change Fee

The Exchange incurs certain expenses in Moving/Adding or Changing (“MAC”) phone lines on the options floor. Currently, according to the PCX, the telecom MAC expenses are not passed on to the members requesting these services. In order to align fees with PCX's expenses incurred in delivering telecom MAC services, the Exchange proposes to assess a $100 per hour fee on a pro rata basis.

2. Statutory Basis

The Exchange believes that the proposal is consistent with Section 6(b) [5] of the Act, in general, and Section 6(b)(4) of the Act,[6] in particular, because it provides for the equitable allocation of reasonable dues, fees and other charges among its members.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

The proposed rule change, as amended, has been filed by the Exchange as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act [7] and subparagraph (f)(6) of Rule 19b-4 thereunder.[8] Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act [9] and Rule 19b-4(f)(6).[10]

The Exchange has requested that the Commission waive the 5-day pre-filing requirement and accelerate the operative date of the proposal. The Commission finds that it is appropriate to accelerate the operative date of the proposal and designate the proposal to become operative immediately.[11]

The Commission finds good cause for waiving the 5-day pre-filing requirement and accelerating the operative date of the proposed rule change, as amended. Acceleration of the operative date will enable the Exchange immediately to impose new fees in order to recover its costs incurred in development and Start Printed Page 38776maintenance or certain Exchange systems and services, consistent with the Section 6(b)(4) of the Act, which requires that an Exchange's rules provide for the equitable allocation of reasonable dues, fees, and other changes among members, issuers, and other persons using its facilities.[12]

At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to be the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.[13]

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect tot he proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying at the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the PCX. All submissions should refer to File No. SR-PCX-2001-21 and should be submitted by August 15, 2001.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[14]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See Letter from Cindy L. Sink, Senior Attorney, Regulatory Policy, PCX, to Nancy J. Sanow, Assistant Director, Division of Market Regulation, Commission, dated by July 11, 2001 (“Amendment No. 1”). In Amendment No. 1, the Exchange requested that the proposed rule change be considered a “non-controversial” rule change pursuant to paragraph (f)(6) of Rule 19b-4 under Section 19b-4(b)(3)(A)(iii) of the Act. In the Exchange's original filing, it had invoked Section 19(b)(3)(A)(ii) of the Act and Rule 19b-4(f)(2) thereunder as the basis for effectiveness upon filing of the proposed rule change. In addition, in Amendment No. 1, the PCX requested that the Commission accelerate the operative date of the proposal and waive the 5-day pre-filing notice requirement.

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4.  The Vendor Equipment Room is a recently-opened, air-conditioned facility housing equipment used by member firms and non-members that are vendors (collectively, cabinet users). The proposed fee on cabinet users in intended to recoup development costs and cover the ongoing costs of operating the facility. Telephone call from Cindy Sink, Senior Attorney, PCX, to Geoffrey Pemble, Attorney, Division of Market Regulation, Commission (July 10, 2001).

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11.  For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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13.  For purposes of calculating the 60-day abrogation date, the Commission considers the 60-day period to have commenced on July 12, 2001, the date the PCX filed Amendment No. 1.

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[FR Doc. 01-18446 Filed 7-24-01; 8:45 am]